Is Zillow (Z) Stock a Buy After Falling Nearly 13% in 1 Day?

If you're interested in the real estate market and would like to profit from it without actually buying homes or other buildings, you might be invested in Zillow Group (NASDAQ: Z) (NASDAQ: ZG) -- or may be thinking of investing in it. The stock is down about 60% over the past year, and it dropped nearly 13% in a single day in early August, before closing down 8%.

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That's a sign of concern regarding the digital real estate specialist, and it may also present a good buying opportunity. Here's a closer look at the situation.

The reason for the drop was the company's second-quarter earnings report, which featured:

• Revenue up 18% year over year
• Mortgage revenue up 75%
• Rentals revenue up 31%

So far, so good, right? The report also featured this, though:

• Traffic to Zillow's mobile apps and sites was down 2% year over year.
• Zillow's average monthly unique users declined 2% to 239 million (but this was true across the category, and Zillow fared better than average).

Perhaps the worst news is that Alphabet's Google will now display real estate listings in all 50 states, which is very likely to have an impact on Zillow.

There are some positives for Zillow, though. Per management, it's implementing artificial intelligence (AI) effectively: "Consumers who use AI mode spend more than three times as long on Zillow, view more than twice as many homes, run nearly three times as many searches -- and contact an agent at nearly three times the rate of consumers who don't use AI mode. The same pattern holds in rentals..."

Greater use of AI may be behind the company's recent layoff of 500-plus people. That's bad for those people, but investors often see layoffs positively, if they result in leaner, more profitable operations.

So, should you invest in Zillow? Well, maybe, if you're doing so for the long term and you're risk-tolerant. The real estate market is tough these days, and the company still posted a double-digit gain. Alternatively, you might consider a real estate fund, which offers greater diversification.

Selena Maranjian has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet and Zillow Group. The Motley Fool has a disclosure policy.